Shocked that companies and mutual funds would invest OPM (Other People's Money) in high-risk investments, the Shocked Investor was originally on a mission to find out if our money ended up in these dubious instruments. This blog now also discusses other financial topics, such as straddles, options, gold, natural gas, agri/food stocks, and the collapse of the US Dollar.

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Wednesday, February 29, 2012

European banks outdid themselves and borrowed a new record from the ECB's LTRO "in an operation that may boost bond and equity markets" (you think?).

The ECB said today it will lend 529.5 billion euros ($712.2 billion) for 1,092 days 800 financial institutions.

Economists predicted an allotment of 470 billion euros, according to the median of 28 estimates (Bloomberg). In the ECB’s first three-year operation in December, 523 banks borrowed 489 billion euros.

“The astonishing number this time is the number of banks participating, which signals that a lot more small banks looked for the money and it is likely they will pass it on to the economy,” said Laurent Fransolet, head of fixed income strategy at Barclays in London, who estimates about 300 billion euros of the total is new lending. “So the impact may be bigger than with the first one.”

“There’s a big difference between stopping the rot and starting a recovery,” said Steve Barrow, head of Group-of-10 research at Standard Bank Plc in London. The loans “might have done the first, but they won’t do the second,” he said.